Essays On Mutual Funds
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Two Essays On Mutual Funds
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Author : Pramodkumar Yadav
language : en
Publisher:
Release Date : 2021
Two Essays On Mutual Funds written by Pramodkumar Yadav and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with Finance categories.
The first essay examines whether fund flows of mutual fund family employees are smart. Using hand-collected data on investment of fund family employees, I show that employee flows predict fund performance up to two years. Moreover, employee flows lead flows of other investors, but not vice versa, further indicating that employee flows are smart. The predictive power of employee flows is stronger when fund family employees are located close to fund managers, pointing to employees exploiting their proximity to managers to learn about the managers' skill or effort. The results do not appear to be driven by ownership changes of portfolio managers themselves, family cross-subsidization efforts, plan design, or employee sophistication.The second essay (with Daniel Dorn) examines psychological cost of team structure in mutual fund industry. We show that team-managed mutual funds have a greater propensity to sell winners and hold losers than solo funds. This propensity is costly as winners sold outperform losers held by 56bp during the next quarter relative to stocks with similar size, book-to-market, and momentum characteristics. Disposition effects are strongest when positions are initiated by a subset of the team who thus bears special responsibility. In contrast, there is no disposition effect when positions are initiated by all team members. This suggests that the difficulty of admitting mistakes to peers (vanity), rather than conformity to in-group pressures (groupthink), poses a costly challenge for teams.
Two Essays On Mutual Funds
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Author : Anna Agapova
language : en
Publisher:
Release Date : 2007
Two Essays On Mutual Funds written by Anna Agapova and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
The second essay examines implications of substitutability of two similar financial assets: conventional index mutual funds and exchange traded funds (ETFs). I seek to explain the coexistence of these fund types, since both offer a claim on the same underlying index return process, but have different organizational structures. This study compares conventional open-end index funds with matched ETFs on various underlying indexes. Aggregate flows are used to detect substitution and clientele effects. I show that conventional funds and ETFs are substitutes, while ETFs have smaller tracking errors and lower fund expenses. However, I find that these fund types are not perfect substitutes, and their coexistence can be explained by a clientele effect that segregates them into different market niches.
Three Essays On The Strategies Of Mutual Funds
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Author : Zhi Wang
language : en
Publisher:
Release Date : 2004
Three Essays On The Strategies Of Mutual Funds written by Zhi Wang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with Investments categories.
Essays On Mutual Funds
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Author :
language : en
Publisher:
Release Date : 2006
Essays On Mutual Funds written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.
The first essay examines the relation between fund performance and stock selection process. I classify mutual funds into two groups according to their distinctive stock selection approaches: tire kickers who rely on fund managers' personal judgment and fundamental analysis to pick stocks, and quant jocks who use computer-based models to select stocks. I examine how the stock selection approach affects mutual fund performance and economies of scale. I document an increasing trend of quantitative techniques used by mutual funds, in addition to some unique characteristics of quant jocks. Quant jocks and tire kickers have similar factor-adjusted alphas, but quant jocks have higher Sharpe ratios. Quant jocks tend to be much smaller than tire kickers. I explore possible explanations for the size difference. I find that although quant jocks can cheaply screen a large universe of stocks, the stocks that quant jocks invest in are smaller and less liquid, which results in higher transaction costs and limited scalability of quantitative investment strategies. The second essay investigates mutual fund managers' private information about future stock returns as revealed in their portfolio holdings. Specifically, we develop three different stock alpha estimators to predict stock returns based on portfolio compositions and past performance of mutual funds. We find that investment strategies based on our stock alpha estimators perform well, when using information on recent fund holdings and fund purchases. This evidence suggests that fund managers' stock selection skills are quite persistent, and vary widely in the cross-section. We also compare our strategies with 12 quantitative investment signals based on market anomalies, and find that our strategies are not subsumed by these quantitative signals. Thus, our stock alpha estimators reflect private skills of active fund managers that are unrelated to known anomalies. Finally, we develop a conditional stock alpha estimator using information on stock characteristics and fund characteristics. Investment strategies based on the conditional stock alphas deliver further improved performance.
Two Essays On Mutual Fund Managerial Skills And Performance
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Author : Ao Wang
language : en
Publisher:
Release Date : 2021
Two Essays On Mutual Fund Managerial Skills And Performance written by Ao Wang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with Mutual funds categories.
This dissertation consists of two essays that study mutual fund managerial skills and performance.Understanding whether mutual funds have skills is important as it could help investors make investment decision. My fist essay studies whether and how fund size affects managers' risk-taking behavior in the setting of fund mergers. I test the relation between fund size and risk-shifting. The main findings are as follows. First, acquiring fund managers' risk-taking declines as size increases resulting from mergers. The decline in risk-taking remains significant after controlling for fund characteristics, diversification effect, and portfolio's systematic risk exposure that can be correlated with managers' investment choices. Second, liquidity is a driving factor for the negative impact of size on managers' risk-taking. Third, I decompose fund size into two components based on either liquidity or risk-taking and examine which component(s) correlate with fund performance. I document that risk-taking is, beyond liquidity, another underlying mechanism for decreasing returns to scale.In the second essay, I study the timing ability of mutual funds in different sentiment periods. I first use DGTW (1997) style timing measure (CT) to examine if mutual funds perform better in high sentiment periods when stock mispricing is enlarged, providing more trading opportunities for mutual funds. Results show that mutual funds have better style timing ability in high sentiment than in low sentiment. The result is robust when I use alternative sentiment measures and different model specifications. Moreover, the style timing ability in high sentiment periods is more pronounced for less expensive funds with lower turnover and active shares. Then I investigate the source of this timing ability using 9 well-known stock return anomalies. I construct an anomaly timing measure (AT) using each of the 9 individual anomalies as well as the composite anomaly. AT is developed to detect whether fund managers could successfully time a certain anomaly. I find that mutual funds have better anomaly timing ability in composite anomaly and 4 contrarian anomalies which are investment-to-assets, asset growth, composite equity issue and net operating assets. Furthermore, I provide evidence that mutual funds with better timing abilities could outperform overall.
Essays On Mutual Fund Performance And Predictability
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Author : Yu Xia
language : en
Publisher:
Release Date : 2022
Essays On Mutual Fund Performance And Predictability written by Yu Xia and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022 with categories.
"This thesis consists of two essays on evaluating mutual fund performance and its predictability. In the first essay, I study the ex ante predictability of 12 well-known predictors for fund performance from investors' perspective. The 12 predictors cover three major categories: fund characteristics, fund performance, and holding-based activeness measures, which are constructed using real-time information. For performance evaluation, I exploit two types of fund picking strategies with either rule-based approach or machine learning methods and find that utilizing machine learning can deliver superior real-time economic gains for investors with fund short-term performance being the primary driver underlying predictability. Specifically, using variable selection methods such as LASSO and elastic net at individual predictor level can generate annual 1.3%-1.7% real-time alphas after adjusting for standard risk factors. The essay further examines whether real-world investors react to those well-known predictors when evaluating mutual fund performance. Using a novel approach to decomposing fund returns, I find that conditional on investors' usage of CAPM, investors react to the components of CAPM alpha implied by predictors in different ways, and investor reaction to predictive information embedded in predictors is stronger within aggressive growth funds. These results provide empirical support for Gârleanu and Pedersen (2018) and suggest ex ante predictability exists not due to lack of investor reaction but as the compensation for employing costly algorithms to identify skilled managers.The second essay examines how decision-making hierarchy in team-managed U.S. equity mutual funds affects their performance and risk-taking behavior. Employing a unique hand-collected dataset, we find that vertically-managed funds with lead managers earn 75 bps per year lower Fama-French five-factor alpha than their horizontally-managed counterparts. Moreover, vertically-managed funds hold less concentrated portfolios and are exposed to lower residual risk, thus showing signs of inferior security selection ability. Using mutual fund industry as a laboratory, the second essay provides evidence supporting a horizontal decision-making structure in organizations functioning in an uncertain expectation environment. These results echo similar mechanisms as in recent cross-country studies on the benefits of democratic form of government for country's economic growth"--
Essays On Mutual Funds
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Author : Xiang Kang
language : en
Publisher:
Release Date : 2020
Essays On Mutual Funds written by Xiang Kang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
This dissertation is composed of two empirical studies on mutual funds. Chapter 1 studies the implication of the timing of mutual fund entry for subsequent long-term fund performance. As fund companies choose when to open new funds and what investment styles they practice, these choices may be informative about the fund qualities. I empirically explore the relation between entrant fund performance and past style performance. By examining a sample of 2,801 mutual fund entrant during the period of 1991--2015, I find that entrant funds with investment styles that have recently performed well tend to underperform in the future. The post-entry performance of hot style entrants is worse than both the post-entry performance of cold style entrants and the concurrent performance of incumbents in the same style categories. The empirical findings are unlikely to be driven by stock-level return reversals or competition among mutual funds, but consistent with fund investors practicing style investing and extrapolating their beliefs on style returns, leading to lower entry thresholds for fund managers in hot investment styles. Chapter 2 includes my joint work with David Xiaoyu Xu on how regulations in the Chinese stock market can affect investor behavior in the mutual fund market. We show that trading suspension, a regulatory policy on stock trading activities, gives rise to stale mutual fund NAVs and indirectly affects fund investors' behavior. Using a sample of 3,205 long-term trading suspension events in China during 2004--2018, we find that opportunistic investors combine firm-specific news and fund portfolio reports to make investment decisions. Quarterly fund flows positively respond to suspended portfolio stocks' unrealized impact on fund NAVs. Such responses are stronger for impactful good news, and portfolio disclosure plays a key role in this mechanism. Our findings suggest the need for a better integrated financial regulatory framework in emerging markets
Essays On Mutual Fund Performance Evaluation With Clientele Effects
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Author : Manel Kammoun
language : en
Publisher:
Release Date : 2015
Essays On Mutual Fund Performance Evaluation With Clientele Effects written by Manel Kammoun and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
This thesis studies the performance evaluation of mutual funds from the point of view of their most favorable clienteles. It contains three essays in which we develop and adapt a performance measurement approach that accounts for investor disagreement and clientele effects to answer three research questions. In the first essay, we investigate investor disagreement and clientele effects in performance evaluation by developing a measure that considers the best potential clienteles of mutual funds. The measure is an upper performance bound in an incomplete market under the law-of-one-price condition and a no-good-deal condition that rules out investment opportunities with unreasonably high Sharpe ratios. We find that considering investor disagreement and focusing on the best potential clienteles lead to a generally positive performance for mutual funds. The total disagreement measured by the difference between upper and lower performance bounds is economically and statistically significant. In the second essay, we diagnose the validity of standard performance measures by comparing their alphas with the alpha from a performance measure that evaluates mutual funds from the point of view of their most favorable investors. The results show that unconditional linear factor models, their conditional versions and the law-of-one price measure give severe but admissible evaluations of fund performance. Consumption-based models suffer from an inadmissibility problem. The manipulation proof performance measure generates alphas that are sensitive to the choice of risk aversion parameter. In the third essay, we propose a clientele-specific performance evaluation based on the style preferences of mutual fund investors. Considering performance disagreement and better exploiting style classification data, we investigate eight measures to represent clienteles with favorable preferences for size and value equity styles. We find that funds assigned to size and value styles have neutral to positive average alphas when evaluated with their appropriate clientele-specific measure. The performance of the other funds is sensitive to the clienteles. Our findings support a significant role for style clienteles in performance evaluation.
Essays On Mutual Funds
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Author : Hongxun Ruan
language : en
Publisher:
Release Date : 2018
Essays On Mutual Funds written by Hongxun Ruan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
In the first chapter, "Social Capital and Innovation: Evidence from Connected Holdings," I investigates how social capital affects innovation. I measure a firm's social capital with connected holdings, which is the fraction of equity of a particular firm held by mutual funds whose managers are connected to the firm's board members through educational networks. I use plausibly exogenous variation in the size of board members' networks as an instrument for connected holdings. I find higher connected holdings lead to larger number of patents granted, more patent citations, and higher firm value created by patents. Connected holdings foster innovation by helping to reduce short-term capital market pressures and to increase management job security. The second chapter, "Marketing Mutual Funds," co-authored with Nikolai Roussanov and Yanhao Wei, we investigate marketing and distribution expenses' impact on the allocation of capital to funds and on returns earned by mutual fund investors. We develop and estimate a structural model of costly investor search and fund competition with learning about fund skill and endogenous marketing expenditures. We find that marketing is nearly as important as performance and fees for determining fund size. Restricting the amount that funds can spend on marketing substantially improves investor welfare, as more capital is invested with passive index funds and price competition decreases fees on actively managed funds. Average alpha increases as active fund size is reduced, and the relationship between fund size and fund manager skill net of fees is closer to that implied by a frictionless model. Decreasing investor search costs would also imply a reduction in marketing expenses and management fees as well as a shift towards passive investing.
Essays On Mutual Funds
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Author : Svetoslav Covachev
language : en
Publisher:
Release Date : 2019
Essays On Mutual Funds written by Svetoslav Covachev and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
In light of this, Essays 1 and 3, co-authored with Vijay Yadav, study the sensitivity of investment flows to past performance, also known as flow-performance sensitivity (FPS). The main aim of Essay 1 is to contribute towards the ongoing debate regarding the shape of the flow-performance relationship in the equity mutual fund industry. Essentially, the question is whether the relationship is linear or non-linear. Whereas Essay 1 addresses the shape of the flow-performance relationship, Essay 3 studies the determinants of its strength. Past performance is a signal that is used by investors when making investment allocation decisions. The main finding of Essay 3 is that the composition of the fund portfolio has an impact on the FPS of the fund. More specifically, a mutual fund manager can decrease flow-performance sensitivity by increasing the total equity portfolio weights of defensive stocks and sensitive stocks, where the former is more effective. In Essay 2, I examine active equity mutual funds that close to new investors.
